01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
WEC Energy Group, Inc. reported 2020 net income attributed to common shareholders of $1,199.9 milliona, or $3.79 per diluted share, up from $1,134.0 million ($3.58 per diluted share) in 2019.
The increase was driven mainly by the Wisconsin segment (up $40.5 millionb), the Illinois segment (up $33.2 million), and the electric transmission segment (up $25.2 million, reflecting FERC ROE orders affecting ATC), partly offset by a $43.6 million larger net loss at corporate and other, which included make-whole premiums on early debt redemptions. Operating revenues were $7,241.7 million, down from $7,523.1 million, with lower retail sales volumes attributed to the COVID-19 pandemic and warmer winter weather. The company's ESG Progress Plan for 2021-2025 targets approximately $15.0 billion of capital expenditures for its regulated utility and non-utility energy infrastructure businesses, plus an expected $1.1 billion share of ATC's capital expenditures.
The plan includes retiring about 1,800 MW of additional fossil-fueled generation by 2025 and adding solar, battery storage, wind, and natural gas capacity. Total long-term debt including current portion was $12,513.9 millionc at year-end, and the debt-to-total-capitalization ratio was 57.6% on an actual basis. Management affirmed a dividend payout target of 65-70% of earnings, and the quarterly dividend was raised to $0.6775 per share in January 2021.
Key risks highlighted include the ongoing COVID-19 pandemic, environmental and greenhouse gas regulation, rate-case and regulatory outcomes, and the uncertain resolution of ATC ROE refund petitions, for which the company carries a $39.1 milliond liability. The auditor, Deloitte & Touche LLP, issued unqualified opinions on the financial statements and internal control over financial reporting.
02—Key points
Key Highlights
- Net income attributed to common shareholders rose to $1,199.9 million ($3.79 diluted EPS) in 2020, from $1,134.0 million ($3.58 diluted EPS) in 2019.
- Wisconsin segment contribution increased $40.5 million to $690.4 million, driven by PSCW rate orders effective January 1, 2020 and lower operation and maintenance expense.
- Corporate and other segment net loss widened $43.6 million to $106.4 million, largely due to make-whole premiums on early debt redemptions.
- ESG Progress Plan targets approximately $15.0 billion of 2021-2025 capital expenditures for regulated utility and non-utility energy infrastructure, plus $1.1 billion for its share of ATC.
- Plans to retire approximately 1,800 MW of additional fossil-fueled generation by 2025, after retiring more than 1,800 MW since the beginning of 2018.
- Total debt was $14,290.8 million, a debt-to-total-capitalization ratio of 57.6% on an actual basis, and the company stated it was in compliance with all debt covenants at year-end.
- Quarterly dividend increased to $0.6775 per share (annual $2.71) in January 2021, with a continued dividend payout target of 65-70% of earnings.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Wec Energy Group kept $0.17.
- Revenue$7.24B100.0%
- Cost of revenue−$2.32B32.0%
- Gross profit$4.92B68.0%
- Operating costs−$3.22B44.4%
- Operating income$1.71B23.6%
- Interest, other & tax−$506.2M7.0%
- Net income$1.20B16.6%
Where FY2020 revenue went
$7.24B- Operating costs: $3.22B, 44% of revenue
- Cost of revenue: $2.32B, 32% of revenue
- Net income: $1.20B, 17% of revenue
- Interest, other & tax: $506.2M, 7.0% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $7.24B$7.52B | −3.7% |
| Cost of Revenue | $2.32B$2.68B | −13.4% |
| Gross Profit | $4.92B$4.84B | +1.6% |
| Operating Expenses | $5.54B$5.99B | −7.6% |
| Operating Income | $1.71B$1.53B | +11.4% |
| Interest Expense | $493.70M$501.50M | −1.6% |
| Net Income | $1.20B$1.13B | +5.8% |
| EPS (Basic) | $3.80$3.60 | +5.6% |
| EPS (Diluted) | $3.79$3.58 | +5.9% |
| Shares Outstanding (Basic) | 315.40M315.40M | 0.0% |
| Shares Outstanding (Diluted) | 316.50M316.70M | −0.1% |
05—Questions
Frequently Asked Questions
What drove the increase in 2020 earnings?
Net income attributed to common shareholders increased $65.9 million. The main contributors were the Wisconsin segment (up $40.5 million, from PSCW rate orders and lower O&M), the Illinois segment (up $33.2 million, from lower O&M and continued SMP investment under the QIP rider), and the electric transmission segment (up $25.2 million, largely from FERC orders affecting ATC's allowed ROE). These were partly offset by a $43.6 million larger loss at corporate and other.
How did COVID-19 affect the company's 2020 results?
The filing states that retail electric sales volumes fell in 2020 due to the pandemic, and that commercial and industrial sales declined from business interruptions and closings. Natural gas sales volumes were also lower, driven by warmer winter weather and the pandemic. The company deferred some COVID-19 related costs, suspended certain disconnections and late fees under regulatory orders, and issued a $340 million 364-day term loan to enhance liquidity.
What is the company's capital investment plan?
The company expects total capital expenditures for its regulated utility and non-utility energy infrastructure businesses of approximately $15.0 billion from 2021 to 2025, with a $1.1 billion share of ATC's projected capital expenditures. Estimated capital expenditures are $3,092.8 million in 2021, $3,048.2 million in 2022, and $3,261.4 million in 2023.
What are the main regulatory and environmental risks?
The filing notes that rate outcomes and the ability to recover costs in customer rates are a significant risk factor. It also identifies climate and greenhouse gas regulation as a risk, including the vacatur of the ACE rule in January 2021 and uncertainty over future EPA action. The company has a $39.1 million liability for potential refunds related to ATC's ROE complaints, and a manufactured gas plant remediation liability of $532.9 million at December 31, 2020.
How is the company's liquidity position?
The company stated that it had approximately $1.4 billion available under its credit facilities at December 31, 2020, and that it believes it has adequate capacity to fund operations for the foreseeable future. Short-term debt was $1,776.9 million, including $1,436.9 million of commercial paper and a $340.0 million term loan. Current liabilities exceeded current assets by $2,065.1 million, which management stated it did not expect to affect liquidity given its back-up credit lines.
06—Continue